Tuesday, January 13, 2009

And Another Testosterone Study....

Coates became interested in how hormones affect traders when he worked on Wall Street during the 1990s. "I thought, from observing traders during the dot-com bubble, that some chemical was causing their irrationality," he said. "Since women seemed largely unaffected by the mania, a male chemical like testosterone became a natural suspect."

Coates reported in April that a study of 17 young male traders he conducted found that they tended to make more money on days that their testosterone levels were high, indicating that the hormone encouraged them to take more profitable risks.

The new study was aimed at investigating whether an innate sensitivity to the hormone was also at work, with some men having essentially been born to be traders by having been sensitized to testosterone in the womb. The researchers studied 44 male traders in London involved in "high-frequency" or "noise" trading, which requires intensely scanning economic data to make very fast trades involving large amounts of money.

To determine the traders' prenatal testosterone exposure, the researchers measured their "2D:4D ratio," the relative lengths of the index and ring fingers on the right hand. Those exposed to higher levels of testosterone in the womb tend to have relatively longer ring fingers.

When the researchers looked at the traders' profits over a 20-month period from 2004 to 2007, they found that the most experienced traders who had been exposed to the most testosterone in the womb earned about six times as much as those exposed the least. They also tended to have the longest careers, surviving about three years more on average.

"I was astonished when I saw the results," Coates said. "I nearly fell off my chair at the strength of the correlation."

Not sure what the correlation is that made Coates almost fall off his chair, but another source says this:

Though it helped determine the male subjects' returns, the 2D:4D ratio accounts for only 20% of the difference in profit levels observed in the study, according to John Coates, a Wall Street trader turned Cambridge scientist and the study's lead author. "Which means there's 80% left unexplained. It's like height in tennis. It appears to give you some sort of advantage, but there's probably a dozen other things giving you an advantage, and if you were to focus just on [height], you'd be missing all sorts of great players like Jimmy Connors," Coates says. "You need speed, you need agility, you need insight, you need intelligence — it's the same thing in trading."

Sounds like an R-squared and not a correlation coefficient. These studies scream to be read by me. When I can get hold of them. Sigh.

Its days as a cozy, boozy gentlemen's club may have long passed, but the City, as London's financial quarter is known, remains a male bastion. As it turns out, that could have more to do with biology than misogyny. In a study by scientists from the University of Cambridge, male City traders who had been exposed to high levels of testosterone in the womb were on average six times more profitable than those exposed to low levels of the hormone.

The studies had no female subjects and thus tell us nothing about what makes some women better traders than other women or men. Thus, the studies tell us nothing about how much female traders make. The writer of this popularization simply appears to assume that the women are all worse than the worst man.

Why write the story up that way, especially as the preceding quote about the 20% coefficient of determination was from the same article? To make female readers angry? Because you are an asshat and can get away with writing it that way?

It would be interesting to review those studies by checking out how their subjects appear to fare now that the markets are in their death throes. We might learn something interesting.

The whole finger-field of research cries out for some replication work by neutral researchers, by the way. Or at least summaries of the actual quantitative effects of such findings.

Take this argument about measuring the relative lengths of forefingers and ring fingers in the stock trader study:

Men typically have a ratio below 1, indicating their ring fingers are longer, Coates said. Women typically have a ratio of 1 or above.

So Coates is arguing that the average woman has forefingers longer than her ring fingers? I tried to Google more about this topic and only came across something in Desmond Morris' (of all people!) book The Naked Woman:

Despite its importance the forefinger is usually only the third longest of the four fingers, being exceeded in most cases by the middle finger and the ring finger. In 45 percent of females, however, it is the second longest finger, relegating the ring-finger to third place. Surprisingly, this is true of 22 percent of males.

Morris' book came out in 2005. If his information is correct, the average woman in fact does NOT have a ratio of 1 or above. He may be wrong. But I have not read about any large studies measuring people's fingers. Yet Coates seems very sure of what he is saying there. Hmm.

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